Burlington posts 2Q loss of $4.4M

GREENSBORO, NC — With sales falling off at a double-digit pace, margins under heavy pressure and interest expense costs rising sharply, Burlington Industries Inc. posted a second-quarter loss of $4.4 million, compared with a small year-ago profit of $554,000.

Sales at the textiles giant declined by 10.1 percent, to $361.4 million from $402.1 million last year, due largely to the earlier sale of the tufted area rug business and the closing of two apparel plants.

Without the leverage of the missing sales, average gross margin thinned by 270 basis points, to 10.7 percent from 13.4 percent a year ago. Gross margin dollars were off by 28.3 percent, to $38.6 million from $53.8 million.

Taking another big bite out of the bottom line, interest costs shot up by 17.4 percent, to $19.4 million from $16.5 million, costing the company an extra $2.9 million.

On the plus side, even on the lower level of sales the company managed to pare its operating costs by 20 basis points, to 8.5 percent from 8.7 percent a year ago. More importantly, measured in absolute dollars, costs were slashed by 12.3 percent, or $4.3 million, to $30.8 million from $35.1 million.

In another big lift, said Douglas McGregor, president and coo, "We achieved significant working capital reductions, including reducing inventories by approximately $73 million from a year ago and generating approximately $20 million of cash in the quarter, which we used to reduce debt and fund capital improvements."

What doesn't show up in the year-over-year comparison is the progress the company has made on a sequential quarterly basis. Compared with the previous quarter, Burlington managed to increase its margins, cut its costs, and record an operating profit of $7.8 million, compared with a first-quarter operating loss of $2.8 million. Moving to the bottom line, the second-quarter loss of $4.4 million was almost two-thirds lower than the $11.5 million first-quarter deficit.